In sports leagues, promotion and relegation is a process where teams are transferred between two divisions based on their performance for the completed season. The best-ranked team(s) in the lower division are promoted to the higher division for the next season, and the worst-ranked team(s) in the higher division are relegated to the lower division for the next season. In some leagues, playoffs or qualifying rounds are also used to determine rankings. This process can continue through several levels of divisions, with teams being exchanged between levels 1 and 2, levels 2 and 3, levels 3 and 4, and so on. During the season, teams that are high enough in the league table that they would qualify for promotion are sometimes said to be in the promotion zone, and those at the bottom are in the relegation zone (or, colloquially, the drop zone or facing the drop).[1][2]

The number of teams exchanged between the divisions is almost always identical. Exceptions occur when the higher division wishes to change the size of its membership, or has lost one or more of its clubs (to financial insolvency or expulsion, for example) and wishes to restore its previous membership size, in which case fewer teams are relegated from that division, or (less often) more teams are accepted for promotion from the division below. Such variations usually cause a "knock-on" effect through the lower divisions. For example, in 1995 the Premier League voted to reduce its numbers by two and achieved the desired change by relegating four teams instead of the usual three, whilst allowing only two promotions from Football League Division One. Even in the absence of such extraordinary circumstances, the pyramid-like nature of most European football league systems can still create knock-on effects at the regional level. For example, in a higher league with a large geographical footprint and multiple feeder leagues each representing distinct geographical regions, should most or all of the relegated teams in the higher division come from one particular region then the number of teams to be promoted and/or relegated from each of the feeder leagues may have to be adjusted and/or one or more non-promoted and non-relegated team(s) playing near the "boundary" between the feeder leagues may have to transfer from one feeder league to another to maintain numerical balance.

The system is said to be the defining characteristic of the "European" form of professional sports league organization. Promotion and relegation have the effect of allowing the maintenance of a hierarchy of leagues and divisions, according to the relative strength of their teams. They also maintain the importance of games played by many low-ranked teams near the end of the season, which may be at risk of relegation. In contrast, a low-ranked US or Canadian team's final games serve little purpose, and in fact losing may be beneficial to such teams, yielding a better position in the next year's draft.

Although not intrinsic to the system, problems can occur due to the differing monetary payouts and revenue-generating potential that different divisions provide to their clubs. For example, financial hardship has sometimes occurred in leagues where clubs do not reduce their wage bill once relegated. This usually occurs for one of two reasons: first, the club can't move underperforming players on, or second, the club is gambling on being promoted back straight away and is prepared to take a financial loss for one or two seasons to do so. Some leagues (most notably English football's Premier League) offer "parachute payments" to its relegated teams for the following year(s).[3] The payouts are higher than the prize money received by some non-relegated teams and are designed to soften the financial hit that clubs take whilst dropping out of the Premier League. However, in many cases these parachute payments just serve to inflate the costs of competing for promotion among the lower division clubs as newly relegated teams retain a financial advantage.

In some countries and at certain levels, teams in line for promotion may have to satisfy certain non-playing conditions in order to be accepted by the higher league, such as financial solvency, stadium capacity, and facilities. If these are not satisfied, a lower-ranked team may be promoted in their place, or a team in the league above may be saved from relegation.

While the primary purpose of the promotion/relegation system is to maintain competitive balance, it may also be used as a disciplinary tool in special cases. On several occasions, the Italian Football Federation has relegated clubs found to have been involved in match-fixing. This occurred most recently in 2006, when the season's initial champions Juventus were relegated to Serie B, and two other teams were initially relegated but then restored to Serie A after appeal (see 2006 Serie A scandal). In some Communist nations, particularly several in Europe after World War II, clubs were promoted and relegated for political reasons rather than performance; clubs in East Germany, Romania, and Yugoslavia were given top-flight placements by the Communist authorities from their beginnings, and often held onto their places with these authorities' backing.

In the United States and Canada, teams are usually not promoted or relegated. Recently, the North American Soccer League, and the United Soccer Leagues of the United States, having teams from across the United States, and some teams from Canada, Puerto Rico, Bermuda and Antigua and Barbuda, discussed a relegation system. The USL set up two leagues, now known as the United Soccer League and the Premier Development League (PDL). Although the system is now in place, it is not compulsory and is rarely used. Occasionally teams voluntarily relegate themselves for financial reasons, while the league promotes ambitious second division teams. There is no promotion or relegation to or from Major League Soccer; the league cites the main reason as the nature of the franchise system. The owner has purchased the right to operate a major league team in a specific city, and relegation would in effect be a breach of that contract by the league. MLS has also had a steady pattern of expansion, much of which comes from promoted lower-level teams, negating the need for relegation. In addition, MLS and the United Soccer League now have a formal relationship, under which all MLS teams are required to field their reserve teams in the USL, either by directly operating a USL team or affiliating with a separately owned club.

In the United States, colleges, most notably the extensive and lucrative NCAA programs (rather than sport clubs as in Europe), act as the primary suppliers of players to two of the major professional team sports: American football and basketball. Baseball drafts players out of either college or high school, while the majority of most teenage hockey players on Canadian junior teams are drafted out of major junior, a semi-pro youth club system, with a growing number of players in the United States coming out of the NCAA's American collegiate programs, such as Hockey East. Although the NCAA is divided into three separate divisions (Divisions I, II, and III) and teams can voluntarily move up or down between the three, membership in a division is determined, among other things, by the number of athletic scholarships a school offers. In men's ice hockey, the NCAA only conducts championships in Divisions I and III; schools that are Division II members are allowed to play as Division I in that sport, with the same scholarship limits as full-time Division I schools.

American/Canadian baseball and hockey have lower-level professional leagues, referred to as minor leagues. Most of these teams affiliate with a major league team in player development contracts. Likewise the National Basketball Association operates its own developmental league. The minor league system can be viewed as an informal relegation system based on individual players rather than teams. Players remain employees of (or, in the case of hockey, under contract to) the parent organization and are assigned to the minor league level appropriate to their skill and development. (In baseball, there are roughly five levels, known as Rookie, Short-Season A, A, AA, and AAA, with each major league team having one to three exclusively affiliated minor league teams at each level.) Skillful players are often promoted, or 'called up', to the parent major league team while under-performing players or players recovering from a major injury are 'sent down' to an affiliated minor league team. (Major league players recovering from injury are often sent to A or AA level teams, however, for reasons of geographical proximity, rather than level of competition; this is particularly true of teams based in California, Texas and Florida.) Transfers of players between various levels of minor leagues are also common. Such promotions and demotions, however, are not mandatory but are made at management's discretion, and may be made at any time during a season. There is one documented case of a modified promotion and relegation system in hockey, pertaining to the dissolution of the World Hockey Association: as part of the NHL–WHA merger, the top four WHA teams were "promoted" to the NHL (albeit not without being stripped of several million dollars and virtually their entire rosters), while the bottom two were relegated to the Central Hockey League, paid cash, and got to keep more of their players.

No gridiron football leagues in North America uses the promotion and relegation system. Though teams in the indoor football leagues often jump from league to league on an annual basis, most of the indoor leagues are considered roughly on par with each other, and as such are not being promoted or relegated at all. The Iowa Barnstormers and Albany Firebirds, at least in name, were relegated from the top level Arena Football League down to its minor league, AF2, but the AFL and AF2 incarnations of each team were not the same legal entities. The only thing each team had in common with its counterpart was its market location and trademarks (it also, unlike the European model, had nothing to do with records). Iowa would later be brought back up to the top level in 2010 as part of a bankruptcy reorganization.

In 2006, the American Indoor Football League hastily and temporarily promoted three amateur teams (among them the Chambersburg Cardinals) to the professional ranks to fill holes in the schedule. Similarly, the 2009 New Jersey Revolution professional indoor football team left the Continental Indoor Football League and played an abbreviated three-game schedule, all against semi-pro teams, which were presumably paid for their appearances. In both cases, their promotion was a matter of proximity and convenience, and as such had nothing to do with the teams' finances or performance on the field; in all seven of the games that involved a semi-pro team and an indoor professional team, the professional team won decisively, with many of the games being shutouts (very rare in indoor football). These are the only known cases of an amateur team moving to the professional ranks since the formation of professional football in the early part of the 20th century.

Australia's A-League does not use a promotion and relegation system. As the league is still relativity young (having only been established in 2004 as a successor to the National Soccer League), steady expansion of the competition is the current priority. The A-League shares franchising elements similar to other ball codes within Australia and major North American sports leagues. The governing body, Football Federation Australia, are currently taking steps to expand the A-League although some have questioned the logic with many clubs struggling to stay afloat financially.

Current expansion of the A-League includes the reintroduction of Northern Fury FC by 2018,[4] and the possibility of new teams from the areas including Canberra, Darwin, Townsville, Geelong, Sunshine Coast, Tasmania, Wollongong, Ipswich, and also Auckland, New Zealand. Other Asian regions including Singapore are also being considered. A national knock-out cup competition titled the FFA Cup and in the style of the FA Cup commenced in 2014. The plan for the cup includes amateur and semi-professional clubs, including National Premier Leagues, and A-League clubs entering the draw on a progressive basis. The options allow for existing State and Territory based cup competitions to remain in place as feeder competitions to the national cup. Although not yet confirmed, in future, the winner of the FFA Cup would have the possibility of being promoted to the A-League competition if the winning team was not already in the competition. Outside of the top flight, promotion and relegation are very common in local and amateur levels of football throughout Australia.

In Japan, the J. League uses a promotion and relegation system. For the first three divisions, it is the same as the Spanish, French, and Greek systems above. But Nippon Professional Baseball does not, perhaps owing to American influence. Professional American football uses a promotion and relegation system in Japan as well — which the now-defunct NFL Europa (due to its much smaller size, only six teams) did not have. Similar differences between association football and baseball have become established in other East Asian countries where both games are played professionally, namely South Korea, China, and Taiwan.

The Super League, a rugby league organization that operates in the United Kingdom with one team in France, abandoned the promotion and relegation system in favor of a licence system. While teams could still be promoted and relegated, their moves were not based solely on performance and were no longer automatic; instead, the league issued a number of licences based on a combination of performance and financial ability to compete at a top level. The licences were issued for three years. However, this licensing system was abandoned and promotion and relegation was brought back for the 2015 season.

In baseball, the earliest American sport to develop professional leagues, the National Association of Base Ball Players (NABBP) was established in 1857 as a national governing body for the game. In many respects, it would resemble England's Football Association when founded in 1863. Both espoused strict amateurism in their early years and welcomed hundreds of clubs as members.

Baseball's National Association was not able to survive the onset of professionalism. It responded to the trend — clubs secretly paying or indirectly compensating players — by establishing a "professional" class for 1869. As quickly as 1871, most of those clubs broke away and formed the National Association of Professional Base Ball Players (NAPBBP).[5] That new, professional Association was open at a modest fee, but it proved to be unstable. It was replaced by the National League of Professional Base Ball Clubs in 1876, which has endured to the present day. The founders of the new League judged that in order to prosper, they must make baseball's highest level of competition a "closed shop", with a strict limit on the number of teams, each member having exclusive local rights.[6]

The modest National League guarantee of a place in the league year after year would permit the owners to monopolize fan bases in their exclusive territories and give them the confidence to invest in infrastructure, such as improved ballparks. In turn, those would guarantee the revenues to support traveling halfway across a continent for games.[7] Indeed, after its first season, the new league banked on its still doubtful stability by expelling its members in New York and Philadelphia (the two largest cities), because they had breached agreements to visit the four western clubs at the end of the season.

The NL's dominance of baseball was challenged several times but only by entire leagues, after its first few years. Eight clubs, the established norm for a national league, was a prohibitively high threshold for a new venture. Two challengers succeeded beyond the short-term, with the National League fighting off a challenge from the American Association after a decade (concluded 1891). In 1903 it accepted parity with the American League and the formation of the organization that would become Major League Baseball. The peace agreement between the NL and the AL did not change the "closed shop" of top-level baseball but entrenched it by including the AL in the shop. This was further confirmed by the Supreme Court's 1922 ruling in Federal Baseball Club v. National League, giving MLB a legal monopoly over professional baseball in the US.

In contrast to baseball's NABBP, the first governing body in English football survived the onset of professionalism, which it formally accepted in 1885. Perhaps the great geographical concentration of population[8] and the corresponding short distances between urban centres was crucial. Certainly it provided the opportunity for more clubs' developing large fan bases without incurring great travel costs. Professional football did not gain acceptance until after the turn of the 20th century in most of Southern England. The earliest league members travelled only through the Midlands and North.[9]

When The Football League (now the English Football League) was founded in 1888, it was not intended to be a rival of The Football Association but rather the top competition within it. The new league was not universally accepted as England's top-calibre competition right away. To help win fans of clubs outside The Football League, its circuit was not closed; rather, a system was established in which the worst teams at the end of each season would need to win re-election against any clubs wishing to join.

A rival league, the Football Alliance, was formed in 1889. When the two merged in 1892, it was not on equal terms; rather, most of the Alliance clubs were put in the new Football League Second Division, whose best teams would move up to the First Division in place of its worst teams. Another merger, with the top division of the Southern League in 1920, helped form the Third Division in similar fashion. Since then no new league has been formed of non-league clubs to try to achieve parity with The Football League (only to play at a lower level, like independent professional leagues in American baseball today).

For decades, teams finishing near the bottom of The Football League's lowest division(s) faced re-election rather than automatic relegation. But the principle of promotion and relegation had been firmly established, and it eventually expanded to the football pyramid in place today. Meanwhile, The FA has remained English football's overall governing body, retaining amateur and professional clubs rather than breaking up.

Promotion and relegation has been used in several eSports leagues. In the World Cyber Games realm, Blizzard Entertainment's video game StarCraft II: Wings of Liberty uses a seven-level promotion and relegation system[10] for its tournament structure. Individual players and pre-made teams can be promoted and relegated during the first few weeks of a league season, which generally lasts around 11 weeks, with promotion and relegation taking place based on a hidden skill rating, which is in turn based on wins and losses.[11] The most professional League of Legends leagues like the League of Legends Championship Series and League of Legends Champions Korea use a promotion and relegation system. The Counter-Strike: Global Offensive Majors use a similar system wherein the top eight finishers of one of the tri-annual Majors are designated with the "Legends" seed and automatically qualified for the next Major tournament. The bottom eight teams must play in a qualifying tournament in order to compete at the next Major.

From 1993 until 2003, the Eurovision Song Contest used various systems of relegation to reconcile the number of countries wishing to participate (approximately 30 at the time) with the number of performances allowed considering time constraints of a live television program. The addition of a semi-final in 2004 allowed for more than 26 songs, but in 2008 automatic qualification of the previous year's top 10 to the final was removed.